Target Painters & Decorators Ltd v Omid Construction Management Group Ltd
[2019] NZHC 2544
•7 October 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-001607
[2019] NZHC 2544
UNDER the Companies Act 1993 IN THE MATTER OF
an application under s 290 of the Companies Act 1993 for an order setting aside a statutory demand
BETWEEN
TARGET PAINTERS & DECORATORS LIMITED
Applicant
AND
OMID CONSTRUCTION MANAGEMENT GROUP LIMITED
Respondent
Hearing: 23 September 2019 Appearances:
M R T Colthart and C Smith for Applicant
A J B Holmes and E R Mulvey for Respondent
Judgment:
7 October 2019
Reissued:
11 October 2019
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
TARGET PAINTERS & DECORATORS LIMITED v OMID CONSTRUCTION MANAGEMENT GROUP LIMITED [2019] NZHC 2544 [7 October 2019]
Introduction
[1] This is an application pursuant to s 290 of the Companies Act 1993 by the applicant, Target Painters & Decorators Ltd (Target), to set aside a statutory demand. The sum at issue is $78,687.23. It arises from an adjudication determination (determination) under the Construction Contracts Act 2002 (CCA) in favour of the respondent, Omid Construction Management Group Ltd (Omid), dated 25 July 2019.
[2] Target has filed judicial review proceedings against the determination, contending that the adjudicator had no jurisdiction to determine the dispute between the parties. Target pleads that the Notice of Acceptance was not validly served, was not served on the Arbitrators and Mediators Institute of New Zealand (AMINZ) and was not in the form prescribed by the regulations as required under the CCA.
[3] The critical issue I must determine is whether the applicant, Target, has demonstrated that, in the context of the CCA, there is a genuine and substantial dispute as to the existence of the debt or whether, as Omid contends, the matters complained of by Target are meritless, technical matters, contrary to the philosophy of the CCA of regular and timely payments and the speedy resolution of disputes.
Relevant legal principles
[4] The Court’s jurisdiction to set aside a statutory demand is contained in s 290(4) of the Companies Act 1993. That section reads:
290 Court may set aside statutory demand
…
(4)The court may grant an application to set aside a statutory demand if it is satisfied that –
(a)there is a substantial dispute whether or not the debt is owing or is due; or
(b)the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c)the demand ought to be set aside on other grounds.
[5] The Court of Appeal has recently confirmed the principles the Court should apply in exercising this jurisdiction.1 The principles are:
(a)The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt.
(b)The mere assertion the dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved other than by means of proceedings in the Court’s Companies Act jurisdiction.
(d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
[6]The Court of Appeal also stated:
[22] It is important to keep in mind the words of the statute. What the applicant must show is that the dispute it raises has substance; the applicant must explain to the Court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute. The Court must bear in mind that it is operating in the summary jurisdiction with the accompanying disadvantages that brings for any applicant. The Court must also keep in mind the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.
(footnotes omitted)
Background facts
[7] Target is a company carrying on business as a painting contractor. It was incorporated in August 2001 and has been in business for over 18 years.
[8] Omid is also a company carrying on business as a painting and gib-stopping contractor. Omid was incorporated in March 2018.
1 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [19]. See also Carroll Civil Ltd v Texco Drilling and Piling Ltd [2019] NZHC 260 at [19].
[9] From around May 2017 to mid-March 2018, Target employed Mr Rajabi, now the manager of Omid, as a project manager.
[10] In March 2018, Mr Rajabi resigned from employment with Target and set up Omid. Target and Omid then entered into a relationship of contractor and sub- contractor.
[11] In March 2018, Target requested Omid to assist it with respect to three projects: these were known as Soma Apartments, Lake Pupuke and Library Lane.
[12] Omid rendered invoices to Target for the period March 2018 to August 2018 for work regarding the three projects. The total amount invoiced was $318,422.48 plus retentions (a further amount of $29,484.56). Thus, the total amount claimed by Omid for six months’ work amounted to $347,907.04.
[13] Target says that it began to develop serious concerns about the large amounts consistently being charged to it by Omid in around June 2019. This is said to be evidenced from various text messages contained in the evidence, including texts from Mr Cheah, of Target, to Mr Rajabi, of Omid.
[14] Target paid to Omid the sum of $254,408.42 in response to a letter of demand from Omid’s solicitors. According to Omid’s calculation, this left a balance owing of
$93,498.62, including GST. Target refused to pay the balance.
[15] On 25 January 2019, Target was served by way of personal service with Omid’s notice of its intention to refer the dispute to adjudication. There is no dispute that the notice of adjudication was properly served pursuant to the CCA. The email address for Target given on the notice of adjudication was [email protected].
[16] Omid then applied to AMINZ, the authorised nominating authority, to nominate an adjudicator. The email address given for Target on that application (dated 30 January 2019) was [email protected]. Target had no knowledge of the application to AMINZ.
[17] AMINZ asked Peter Fehl (the adjudicator) to accept appointment as the adjudicator. Mr Fehl sent an email on 6 February 2019 to a solicitor at Greenwood Roche, solicitors, (acting for Omid) and to [email protected]. In his email, Mr Fehl stated, “I attached confirmation of my willingness to act as adjudicator subject to security of costs.”
[18] An amended form 2A Notice of Acceptance (as required under s 35A of the CCA) was attached to the email.2 The Notice differs from the prescribed form in a number of respects.
[19]The relevant parts of the Notice of Acceptance read:
Acceptance of appointment as adjudicator
I Peter John Fehl accept appointment as adjudicator under section 35 of the Construction Contracts Act 2002 to determine a dispute between Omid Construction Management Group Limited and Target Painters and Decorators Limited, subject to Security of Costs being paid before this acceptance is effective.
…
For the claimant
You, Omid Construction Management Group Limited, must within 5 working days of the Security for Payment being paid in full refer the dispute to the adjudicator by serving a written adjudication claim on the adjudicator. …
(emphasis in original)
[20] The following emboldened part of the form (which mirrors the prescribed form 2A wording) reads:
Important: The 5-working day period for providing the adjudication claim has already commenced. If you do not know how to write an adjudication claim, you should consult a lawyer immediately.
(emphasis in original)
2 Regulation 5A of the Construction Contracts Regulations 2003 provides that “[t]he information that, in accordance with section 35A of the Act, is required to be set out in an adjudicator’s notice of acceptance must be in form 2A.”
[21] Thomas Tootil, the Operations Manager of Target, replied to the adjudicator’s email on 7 February 2019 on behalf of Target. In his email, Mr Tootil said that the matter was disputed and that he would be in touch. Mr Tootil sent a carbon copy of the email to Sid Cheah, the Managing Director of Target, at [email protected].
[22] Target says it heard nothing further from either the adjudicator or from Omid for the following four months. Target says that it took the view that the matter had gone away, and it then began preparing its own adjudication claim against Omid.
[23] On 26 June 2019, the adjudicator sent to the parties an email with what he described as confirmation that the required security of $3,000 had been paid into his account. In the email, he directed that Omid was to refer its adjudication claim to him, copied to Target, no later than Wednesday, 3 July 2019. The email further stated that Target could serve a written response and any accompanying document to the adjudication claim with him (copied to Omid) within five working days after receiving the claim as provided in s 37 of the CCA. Mr Fehl also noted that he had a discretion to allow further time for service of the response.
[24] Richard Littlewood, a quantity surveyor engaged by Target, responded to the adjudicator that same day, confirming that he had been asked by Target to prepare an adjudication claim against Omid. He explained that he had not had an opportunity to finalise it because of Mr Cheah’s absence overseas, but Mr Littlewood sent it the adjudicator in draft form anyway.
[25] On 27 June 2019, Greenwood Roche, solicitors for Omid, then emailed Mr Littlewood a link to Omid’s adjudication claim and various other supporting documents, sending copies to Mr Tootil and Mr Cheah. Mr Littlewood and Mr Cheah were both overseas at that time.
[26] In his email to the adjudicator dated 26 June 2019, Mr Littlewood requested that the matter be postponed until both he and Mr Cheah returned to New Zealand on 31 July 2019.
[27] In an email dated 27 June 2019, the adjudicator sought a response from Omid as to whether it would agree to an extension of time until 7 August 2019 for Target to file a submission in response. In an email sent later that day, the solicitors for Omid advised that they objected to an extension of time.
[28] On 27 June 2019, Mr Littlewood, on behalf of Target, emailed the solicitor for Omid (with a copy to Mr Fehl) stating as follows:
I would like to see the adjudication notice and hard copies of the bundle of documents as my wife and I do not get back into NZ until 31 July. The extension would be the fair option but if the adjudicator, as you suggest, feels he has enough documentation to derive a determination I am happy to proceed.
[29]In a further email sent later that date, the adjudicator advised the parties that:
As Mr Littlewood has not pushed for an extension for submission or the respondent’s response I confirm that this is to be provided within five working days of receipt of the claimant’s claim.
[30]By email dated 28 June 2019, Mr Littlewood advised Mr Fehl as follows:
I have no computer nor seen the documents from Omid. However, our notice of adjudication in essence will contain the majority of the response and if you are happy to use this as our response we are happy to run along with it.
[31] The adjudicator issued a determination to the parties on 25 July 2019. In the determination, Mr Fehl ordered that Target pay the respondent $75,129.41 inclusive of GST, together with $3,557.82 for his costs. That amounted to a total of $78,687.23. The amount was ordered to be paid “within five days of receipt” of the determination.
[32] Omid issued the statutory demand, the subject of this application, the following day, on 26 July 2019.
[33] On 28 July 2019, Mr Littlewood sent Mr Fehl an email stating that Target had noticed an error in Mr Fehl’s mathematical calculation. The email read:
We have noticed an error in the maths also. The total of Omid’s outstanding invoice adds up to $93,498.81. The deduction should be 1,883 hours at $15 per hour giving a revised total of $61,034.31. Please amend …
[34]The adjudicator responded the same day advising as follows:
Further to your email, I advise that I worked as best I could with the information provided by the parties in providing my determination. Further submissions are now closed.
[35] Target has filed judicial review proceedings in this Court contending that the adjudicator lacked jurisdiction to make the determination. In the Statement of Claim (dated 13 September 2019), Target contends that the Notice of Acceptance issued by the adjudicator was invalid and had no effect – and, accordingly, the adjudicator was not validly appointed and had no jurisdiction to determine the dispute – because:
(a)It was not served on the applicant, Target, in accordance with s 80 of the CCA or regs 9 and 10 of the Construction Contracts Regulations 2003;
(b)It was not served on AMINZ, the authorised nominating authority, as required by s 35(2) of the CCA; and
(c)It was not in the form prescribed by the Regulations, as required by s 35A(1) of the CCA.
Analysis and decision
[36] Target contends that, on the basis of the judicial review proceedings and the three particular grounds of review articulated at [35] above, there is a substantial dispute whether the debt claimed in the statutory demand is owing and/or that the demand ought to be set aside on the innominate ground in s 290(4)(c) of the Companies Act.
[37] In determining the issue of whether either of the grounds under s 290 has been made out, the starting point of any analysis is s 60 of the CCA and the purpose and principles of that legislation.
[38] According to s 3 of the CCA, the purpose of the Act is to facilitate regular and timely payments, to provide for the speedy resolution of disputes and to provide remedies for the recovery of payments under a construction contract.
[39] In interpreting the legislation as a whole, the courts have repeatedly emphasised the legislation’s “pay now, argue later” regime.3 The scheme of the Act is to provide interim or provisional relief to parties to a construction contract while they work through other, more formal, dispute resolution procedures.4
[40] Consistent with that scheme, s 60 of the CCA provides that an adjudicator’s determination remains binding and of full effect notwithstanding the existence of an existing or threatened application for judicial review. It reads:
60Effect of review or other proceeding on adjudicator’s determination
An adjudicator’s determination is binding on the parties to the adjudication and continues to be of full effect even though –
(a)a party has applied for judicial review of the determination; or
(b)any other proceeding relating to the dispute between the parties has been commenced.
[41] In interpreting s 60, the Court of Appeal in Rees v Firth held that the issue of judicial review proceedings does not interfere with the objective of the CCA to solve cash-flow problems in the construction industry as a party with the benefit of a money determination may still enforce it.5 It held:
[25] … Mr Hughes for Holmes Construction submitted that this provision [s 60] was similar to a provision to the effect that the filing of an appeal does not operate as a stay of the decision appealed from. We consider that it goes further than that, however. It reflects the “pay now, argue later” philosophy that underlies the CCA. Accordingly, it seems to us unlikely that a court would be prepared to grant interim relief under s 8 of the Judicature Amendment Act 1972 in the context of judicial review proceedings challenging an adjudicator’s determination as to payment.
(footnotes omitted)
[42]The Court of Appeal further held that:
[27] The courts must be vigilant to ensure that judicial review of adjudicators’ determinations does not cut across the scheme of the CCA and undermine its objectives. … In principle, any ground of judicial review may
3 See Marsden Villas Ltd v Wooding Construction Ltd [2007] 1 NZLR 807 (HC) at [9]–[17]. See also Law Commission Protecting Construction Contractors (NZLC SP3, 1999) at 11.
4 Willis Trust Co Ltd v Green HC Auckland CIV-2006-404-809, 25 May 2006 at [20].
5 Rees v Firth [2011] NZCA 668, [2012] 1 NZLR 408.
be raised, but an applicant must demonstrate that the court should intervene in the particular circumstances, and that will not be easy given the purpose and scheme of the CCA. Indeed, we consider that it will be very difficult to satisfy a court that intervention is necessary. As an example, given that an important purpose of the CCA is to provide a mechanism to enable money flows to be maintained on the basis of preliminary and non-binding assessments of the merits, it is unlikely that errors of fact by adjudicators will give rise to successful applications for judicial review. In the great majority of cases where an adjudicator’s determination is to be challenged, the appropriate course will be for the parties to submit the merits of the dispute to binding resolution through arbitration or litigation (or, of course, to go to mediation).
(emphasis added)
[43] Judicial review relief to set aside a determination “will be available only rarely”; the threshold is high.6 In Body Corporate 20012 v Keene, Brewer J held:7
[17] … It would require a genuine excess of jurisdiction by the adjudicator (which would mean [Body Corporate 12] should not be subject to the CCA scheme), a serious breach of natural justice, or some apparent and significant error of law to persuade me to intervene.
[44] In this case, the issue of whether Target has met the onus of demonstrating that it has a genuine substantive dispute or made out the “other ground” limb (s 290(4)(c)) is to be determined by a reference to the high threshold and very limited availability of judicial review under the CCA.
[45] I interpret s 60 as not excluding altogether the ability of the courts to set aside a statutory demand on the basis of judicial review proceedings challenging an adjudicator’s determination. Section 60 is not a privative clause and I accept that Target has a right (which it has exercised) to institute judicial review proceedings. In my view, express language would be required to reach a conclusion that the s 290 jurisdiction had been excluded.8 However, I find that to set aside a statutory demand under s 290 on the basis of a genuinely arguable error of law in an adjudication determination under the CCA (and thus, on one view, to suspend or undermine the
6 At [22].
7 Body Corporate 20012 v Keene [2017] NZHC 2953, [2018] NZAR 120. See also Anderson v Swindells [2018] NZHC 1803, [2018] NZAR 1375 at [42].
8 Despite the reservations expressed by the Court of Appeal in Rees v Firth, above n 5, at [26] (an issue on which there was no ultimate determination), I note that this Court has held, in Concrete Structures (NZ) Ltd v Palmer HC Auckland CIV-2004-463-825, 17 February 2005, that s 60 of the CCA does not preclude interim relief under s 8 of the Judicature Amendment Act 1972. Harrison J in Willis Trust Co Ltd v Green HC Auckland CIV-2006-404-809, 1 March 2006 also granted interim relief in circumstances where there was irreversible prejudice established.
scheme of the CCA) means that an applicant must establish some substantial and irreversible countervailing prejudice or something akin to a miscarriage of justice. It would likely be a rare and exceptional case. The critical issue is whether Target has established that threshold in this case.
[46] I now turn to consider each of the grounds for judicial review, beginning with the allegation that the adjudicator exceeded his jurisdiction because the Notice of Acceptance was not in the form prescribed by the Regulations, as required by s 35A(1) of the CCA. I agree with Mark Colthart, for Target, that that is the stronger of the review grounds advanced.
Lack of jurisdiction — Notice of Acceptance not in form prescribed by the Regulations, contrary to s 35A of the CCA
[47] I find that it is clearly and genuinely arguable that the adjudicator exceeded his jurisdiction (acted unlawfully) in amending the prescribed form (2A of the Notice of Acceptance) and suspended the time period for filing an adjudication claim (s 36) to provide that his acceptance was conditional upon the question of security of costs being paid. The error was compounded, arguably, by contradictions in the Notice of Acceptance actually issued, namely the emboldened wording (not amended by the adjudicator) stating that the five-day working period for providing the adjudication claim “has already commenced”.
[48] It is clearly arguable that the Notice of Acceptance was issued contrary to s 35A (“must be in the form prescribed”) and that the five-day period for the adjudication claim to be filed (s 36) cannot be varied either by the agreement of the parties, or by the adjudicator, or by any other means.
[49] In amending the provisions of the prescribed form in the manner he did, the adjudicator acted, arguably, in breach of ss 35A and 36.
[50] I accept the argument of Mr Holmes that under s 35 there is no time limit imposed on an adjudicator as to when he or she must serve a Notice of Acceptance, having indicated, within two days of receiving a request, whether he or she is willing and able to act as an adjudicator (s 35(1)). However, once having elected to serve a
Notice of Acceptance, it is clear that the Notice of Acceptance must comply (as s 35A states) with the form prescribed in the Regulations. However, that was not done in this case.
[51] It appears that the adjudicator was adopting the pre-2015 practice of making his appointment as adjudicator conditional on security for costs being paid. However, it is clear, as Mr Colthart submitted, that the legislative amendments in 2015 (namely, s 35A), together with the new form 2A of the amended Regulations, intended to abolish that practice. That is apparent from the following extract from the CCA Handbook: Making the Construction Contracts Act work, where it is stated:9
An adjudicator’s notice of acceptance of appointment must contain additional information set out in the new Form 2A of the amended Regulations. In addition to the matters ordinarily required, the adjudicator must now identify alternative options for resolution and indicate the likely costs of the adjudication. This new form will eliminate past practice of adjudicators issuing notices of acceptance conditional upon payment of fee security, and any such requirement must now be addressed before a notice of acceptance is issued.
(footnotes omitted)
[52] I accept that, in establishing an arguable error of law on this ground (namely, a failure by the adjudicator to follow the requirements of s 35A and the Regulations), the facts of this case are different from Condor International Ltd v Steelhaus 2014 Ltd, where Associate Judge Smith held that the applicant had attempted to dress up errors of fact as errors of law.10 However, to succeed on judicial review in this case, Target will need to establish that any error of law was material and that, as a matter of discretion, the Court should make an order quashing the determination. In my view, the fundamental problem for Target in this case is that it has not produced a sufficient evidential foundation to establish that either of those two matters is genuinely triable for the purposes of satisfying s 290 of the Companies Act.
[53] I accept the submission of Mr Holmes that Target has provided no real evidence as to what its position is on the merits of the dispute underlying the adjudication and/or
9 Peter Degerholm CCA Handbook: Making the Construction Contracts Act work (Writes Hill Press Ltd, Wellington 2016) at 17. See also Construction Contracts Amendment Bill 2013 (97-2) (select committee report).
10 Condor International Ltd v Steelhaus 2014 Ltd [2019] NZHC 296.
how the alleged error of law has in any way prejudiced Target (except that it does not like the result and makes the bare assertion that it is wrong). Target participated in the adjudication process, it filed its own draft adjudication claim before the adjudicator setting out its position and indicated, despite the refusal of an adjournment by the adjudicator, that it did not object to the process proceeding on the basis of the submission that it had filed. There is no evidence that the arguable error of law prevented Target from either having its say or that it was precluded from advancing certain critical arguments to the adjudicator.
[54] I thus reject the contention of Mr Colthart that the flawed process of the adjudicator foreclosed important matters from being addressed in the adjudication. There is no evidence to support that assertion, and it was incumbent on Target produce such evidence. To the extent Target is suggesting that the refusal of an adjournment resulted in prejudice, such claim has no merit. There is no challenge to the refusal to grant an amendment in the judicial review proceedings and the adjournment was, in any event, accepted by Mr Littlewood on behalf of Target.
[55] I acknowledge that both Mr Cheah and Mr Littlewood, on behalf of Target, were overseas at the time that their submission to the adjudicator needed to be filed, but the alleged error of law, which in effect suspended the running of the five-day period under s 36, actually gave Target more time to respond to the adjudication claim filed by Omid. I also accept that Target may well have thought that the claim had been abandoned because no action was taken by Omid between February and June 2019. However, in advance of the advice from the adjudicator on 26 June 2019 that the adjudication process was under way, Target had been preparing its own claim against Omid addressing what appear to be the very same issues in dispute in the adjudication. Target after all did rely upon that document and filed it with the adjudicator. All these facts are of course to be assessed in the context of a relatively modest amount of money in dispute. That modest sum may also be a very relevant factor for a judge when determining whether to grant relief in the judicial review proceedings. The CCA emphasises speed and cost-effective resolution of disputes.
[56] The text messages attached to the evidence of Mr Rajabi, on behalf of Omid, do not assist Target in demonstrating that the alleged errors of law gave rise to
substantial prejudice. The adjudicator expressly took into account Target’s defence/counterclaim that there were reliability and quality issues.11 He also took into account Target’s contention that the invoices were issued by Omid using an hourly rate in excess of that agreed and that Omid left the site in a final state with numerous defects and incomplete areas.12 I further note the adjudicator had regard to the letter sent by Mr Cheah (dated 10 July 2019) and Target’s rejoinder to Omid’s reply (dated 11 July 2019).13 Rather than demonstrating that the process adopted by the adjudicator foreclosed Target’s ability to raise relevant issues, the evidence tends rather to demonstrate that all relevant arguments and submissions were addressed. Likewise, the submission on behalf of Target that it was underprepared as a result of the alleged errors by the adjudicator lack substance.
[57] I also reject the submission that Target was “cut off at the knees” by the process. Target was always going to have to contend with the mandatory statutory five-day period for responding to a claim and, as noted above, in the circumstances, Target in fact had more time than it might otherwise have had (that is, pursuant to a lawful regular process) to prepare a response and to file it. The errors complained of are of a highly technical nature unsupported by any evidence of real prejudice, and they do not undermine the principles or scheme of the legislation in any material way.
[58] On the evidence before me, I find that the arguable error of law is an abstract one with no real consequence and falls well short of demonstrating some real and substantial countervailing prejudice such that, despite the statutory injunction in s 60 of the CCA, the statutory demand should be set aside. The high threshold of a rare and exceptional case has not been made out.
[59] I acknowledge that relief in judicial review proceedings can be an important way to vindicate rights and to ensure that justice is not only done but “manifestly be seen to be done”.14 However, in the statutory scheme of the CCA the threshold for judicial review is, as indicated above, a high one, and, in determining whether to grant
11 Omid Construction Management Ltd v Target Painters & Decorators Ltd (Adjudicator’s Determination, 23 July 2019) Reasons for Determination at [9](c).
12 At [19].
13 At [28].
14 See R v Thames Magistrates’ Court, ex parte Polemis [1974] 1 WLR 1371 (QB) at 1375–1376.
relief, the Court will be concerned to evaluate the outcome on the merits had the alleged errors not been made.
[60] In reaching these conclusions, I further note, that there is no evidence before me to suggest that any refusal to set aside a statutory demand will result in the judicial review proceedings being nugatory. It is also important to recall that if Target does have genuine claims against Omid arising out of the dispute between them, it could bring proceedings in either the Disputes Tribunal and/or the District Court or possibly, through a mediation process.
The other grounds of judicial review
[61] I intend to address the remaining grounds of review in relatively short order, given my clear view that they lack merit and are essentially makeweight.
[62] First, in my view, there is no genuinely arguable error of law that the Notice of Acceptance was not validly served on the applicant in accordance with s 80 of the CCA or regs 9 and 10 of the Regulations.
[63] Section 80 is not mandatory; it simply provides a gateway by which service can be accomplished. It is well established that if a document is served on a party by means other than that stipulated in s 80, and the evidence satisfies the Court that the document has come to the attention of that party, then that is sufficient proof of service.15
[64] In this case, Target’s own evidence confirms that it received the Notice of Acceptance in February 2019, it responded to the adjudicator the following day, copied in its lawyer, and it ultimately participated in the process.
[65] This case is clearly distinguishable from the District Court judgment of Buchanan Construction Ltd v Watson, a case relied upon by Target.16 In that case, there was no evidence that the intended recipient of the email at issue had received it (it may have gone to her junk box but she was not aware of that), and her evidence
15 West City Construction Ltd v Edney [2005] 17 PRNZ 947 (HC) at [35].
16 Buchanan Construction Ltd v Watson [2018] NZDC 4570.
was that she had not received it. On the evidence before me, it is not credible, in my view, for Target to contend that it was in any way prejudiced by the steps taken by the adjudicator to serve the Notice of Acceptance and any of the attachments. The service carried out by the adjudicator was valid and effective.
[66] Secondly, Target’s contention that it never consented, either explicitly, or impliedly, by its conduct, to receiving a Notice of Acceptance by email to a generic email address (reg 10 of the Regulations) similarly lacks merit. Target did receive the email, was informed by its contents and acted upon it. At no stage did it indicate to the adjudicator that it objected to being served by email, and it continued to receive and respond to emails from the adjudicator in June 2019. Even if I am wrong in that assessment, I do not see how any error was material or could possibly (on its own) give rise to any relief.
[67] Thirdly, as to the alleged ground of judicial review that the Notice of Acceptance was not served at all on AMINZ as required by s 35(2) of the CCA, there is no evidence at all before me that the adjudicator failed to take that step. On the evidence before me, the ground is not genuinely arguable.
[68] Fourthly, although not expressly pleaded in its statement of claim, Target contended that the adjudicator committed further arguable errors of law in his failure to consider and grant Target’s application to correct errors in the determination.
[69] Following the determination, Mr Littlewood filed a document with the adjudicator, on behalf of Target, contending that there was an “error in the maths”. He claimed that the “deduction should be 1,883 hours at $15 per hour” leading to a revised total of $61,034.31.
[70] In response to Mr Littlewood’s email, the adjudicator indicated that he had worked as best he could with the information provided and refused to make any correction.
[71] Target says that this was a bona fide attempt to invoke what is called the slip rule pursuant to s 47(3) of the CCA. It contends that, in its letter of demand (dated
7 December 2018), Greenwood Roche demanded from Target the total sum of
$93,498.62. That was inclusive, it is contended, of GST. However, this figure changed in Omid’s claim to being plus GST. Target says there was no basis for this change and it was clearly a mistake given Omid’s lawyer’s summary of the amount owed by Target.
[72] Target further contends that this mistake was not picked up by the adjudicator, who began the determination by stating that the sum claimed by Omid was
$107,523.41. The adjudicator’s starting point is said to have been wrong. This is all said to have led to a mathematical calculation that is “out by approximately $14,000”.
[73] This is, of course, a matter of small consequence and, in any event, I do not see how Target can establish that the alleged error is a material error of law; it is at best a factual error. There is no evidence that the particular matter of GST was put to the adjudicator as being the basis for the claim that he should amend his determination. As I see it, there was some onus on Target to set out its position and to demonstrate clearly that the adjudicator, as alleged, had made a mathematical miscalculation. The response of the adjudicator working within the context of the statutory two-day deadline in s 46(3) appears, in the circumstances, to have been an entirely reasonable and unimpeachable one.
[74] Having reviewed all of the grounds of judicial review alleged, I conclude that the applicant has failed to establish a proper basis for setting aside the statutory demand whether under s 290(4)(a) (substantial dispute) or subs (4)(c) (“the other ground”). The application must therefore fail.
Debt not due
[75] Target further challenges the statutory demand at issue on the basis that the debt was not due when the demand was served.
[76] The determination was delivered on 25 July 2019 and the statutory demand was issued by Omid the following day, namely on 26 July 2019. The demand was issued when the determination provided for payments to be made by Target “within five days” of receipt of the determination.
[77] In the circumstances, Target contends that the debt could not have been due until 1 August 2019, being five days after the determination was delivered on 25 July.
[78] In my view, this is a further example of Target’s reliance on technical and essentially meritless arguments seeking to set aside the statutory demand and avoid its obligations under the CCA. In my view, the debt was due when the demand was served; the obligation to make payment arose immediately upon the issuing of the determination. Even if I am wrong in that conclusion, I would exercise my discretion under s 290(5) of the Companies Act not to set aside the demand. Clearly, even if the statutory demand was defective, there is no evidence at all that substantial injustice would be caused if it were not set aside.
Result
[79] The application by Target to set aside the statutory demand pursuant to s 290 of the Companies Act 1993 is dismissed.
[80] I order pursuant to s 291 of the Companies Act 1993, Target Painters & Decorators Ltd must pay the debt claimed in the statutory demand, being $78,687.23, by 18 October 2019. Target Painters & Decorators Ltd will be presumed to be unable to pay its debts if it fails to pay the debt by 18 October 2019, and Omid Construction Management Group Ltd may then apply to put Target Painters & Decorators Ltd into liquidation.
Costs
[81] As to costs, I am of the preliminary view that the applicant should pay costs to the respondent on a 2B basis together with a 25 per cent uplift pursuant to r 14.6(3)(b)(iii) of the High Court Rules 2016 on the basis of a lack of sufficient merit.
[82] If the parties cannot agree on costs, then memoranda are to be filed within 14 days.
Associate Judge P J Andrew
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